If unemployment is a major problem in an economy, which of the following would be an appropriate monetary policy response?

Question

Quizplus · Accepted Answer

A decrease in the discount rate would encourage banks to lend more money, which would increase the money supply and promote economic growth. This would help to reduce unemployment by creating new jobs and stimulating economic activity. The other options listed would be less effective or could even make the problem worse. For example, a decrease in income taxes might encourage people to spend more money, but it would also reduce government revenue and potentially lead to higher inflation. The sale of government bonds or an increase in the reserve ratio would both have the effect of decreasing the money supply, which could worsen unemployment by reducing business investment and consumer spending. An increase in public investments could help to create jobs, but it would also require government spending that might be difficult to sustain over the long term.

If Unemployment Is a Major Problem in an Economy, Which